Retirement Age “Should be Scrapped”

Equality commission says an ageing population and increased willingness among older people to work should see default retirement age scrapped

The government will reassess enforced retirement over the coming months. Photograph: PR/Asda

Workers should be able to stay in their jobs beyond the age of 65, and employers should be incentivised to allow older employees to work flexibly, the UK’s equality watchdog said today.

The Equality and Human Rights Commission (EHRC) said the ageing population and an increased willingness to work among older people meant it was time for the government to scrap the default retirement age, a law which allows firms to force staff to finish work at 65.

It said scrapping the rule would remove the “safety net” for employers and encourage more radical approaches to issues such as flexibility, handling the performance of workers of all ages, and improving occupational health.

Hand-in-hand with this change, EHRC said, the government should extend the right to request flexible working to all employees and consider introducing incentives for flexible employers, with a particular emphasis on the over-50s.

The commission said the economy “would be the biggest winner” from the proposed changes, with research from the National Institute of Economic and Social Research suggesting that extending working lives by 18 months would earn Britain £15bn.

The government is currently looking into changes to the rule, and has indicated it could eventually scrap it entirely.

A survey of 1,500 workers by the commission suggests a rule change would be welcomed by many workers. It found that 64% of women and 24% of men wanted to remain economically active after the state pension age (currently 65 for men and rising to 65 for women by 2020).

Around 60% said they wanted to continue working but on a part-time basis, while 40% said they would like to stay in their current jobs but with greater flexibility in hours worked.

The commission’s deputy chair, Baroness Margaret Prosser, said it was time to move away from systems put in place when people died not long after reaching state pension age.

“Britain has experienced a skills exodus during the recession, and as the economy recovers we face a very real threat of not having enough workers – a problem that is further exacerbated by the skills lost by many older workers being forced to retire at 65,” she said.

“Keeping older Britons healthy and in the workforce also benefits the economy more broadly by decreasing welfare costs and increasing the spending power of older Britons.

“Our research shows that to provide real opportunity to older workers, abolishing the default retirement age needs to be accompanied by a concerted drive by government, employers and agencies to meet the health, caring and work needs of the over-50s to enable them to remain in the workplace. Greater flexibility can help to deliver this.”

A spokesman for the Department for Work and Pensions said the government’s long-term aim was to consign fixed retirement ages to the past.

“We have already committed to bringing forward our review of the default retirement age to this year. We are taking evidence now from business and individuals on the impact of retirement ages,” he said.

“Our review will reach a decision after full consideration of the evidence on whether the default retirement age is still appropriate.”

Source of article: http://www.guardian.co.uk/money/2010/jan/25/retirement-age-scrapped-equality-commission

New Compulsory Pension Laws

New laws set up an additional state pension system, known as “personal accounts”, run by an independent body.

The system introduces compulsory pension saving for employees not already members of good company pension schemes. Employers as well as staff will have to make contributions, to improve the level of pension saving in the UK.

There will also be automatic enrolment, and compulsory employer contributions, into existing company pension schemes to encourage fuller take up.

The new system will be operational from 2012 and employees compelled to join the scheme unless they already have a good workplace pension, or choose to opt out.

Contributions will be paid on earnings between £5,000 and £33,500 p.a. and there will be an annual ceiling on total contributions of £3,600. People will not be able to transfer funds from existing pension plans, while contributions will be collected centrally and paid into a choice of investment funds

Personal accounts are part of a wider pension shake-up involving a raising of the state pension age to 68. Staff will pay in four per cent of their salaries and employers three per cent, with an extra one per cent from the Government in the form of tax relief.

Ministers hope that by introducing automatic enrolment they will overcome the barrier of inertia, which is one of the reasons why people do not save enough for their retirement.

About seven million workers are not putting enough away for their old age and the new system will encourage savings from low to moderate earners in particular.

Age Concern said: “We are glad the Government has taken up the Pensions Commission’s recommendations for automatic enrolment into this scheme. However we also want it to invest in providing good quality information and advice about pensions and savings, to help people make informed choices on saving for retirement.

But critics say the Government’s attempts to increase incentives to save for retirement are totally undermined by its obsession with means-testing.

“Many people on low to middle incomes will think twice about setting aside money for old age when Labour’s massive increases in means-testing means that they would simply be saving money for the Government rather than themselves,” said Liberal Democrat spokesman Danny Alexander

And the National Pensioners Convention, Britain’s biggest pensioner organisation, said the Bill would commit a generation of low paid workers to a private pension scheme that could not guarantee they would be above the level for means tested benefits when they retire.

“The money spent on such a financial gamble should be used to strengthen the state pension system rather than unreliable private pensions which lacked public confidence and credibility,” it said.

source: http://www.telegraph.co.uk/news/newstopics/politics/1568488/Law-brings-in-compulsory-pension-saving.html

Changes to the State Pension from 6 April 2010

The State Pension is changing from April 2010. This means more people will qualify for a full basic State Pension. Find out about the most important changes and what they will mean for you.

Qualifying for a State Pension

From April 2010, the way you qualify for a State Pension is changing:

• it will be easier for parents and carers to build up qualifying years of National Insurance and get a State Pension
• to get a full basic State Pension, you will only need 30 qualifying years of National Insurance contributions

(At the moment, men normally need 44 years and women 39 years.)

• once you have built up a single qualifying year of National Insurance you will qualify for at least some basic State Pension

If you’re over 55, or if you care for someone, you should find out how the changes may affect you. You should also find out if you need to take action now.

Source: http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_069498

UK Economy Emerges From Recession

The UK economy has come out of recession, after figures showed it had grown by a weaker-than-expected 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters – the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs – last week, UK unemployment fell for the first time in 18 months.

The UK’s had been the last major economy still in recession.

Europe’s two biggest economies – Germany and France – came out of recession last summer. Japan and the US also emerged from recession last year.

‘Below expectations’

“We can say that Britain has just crossed the line in coming out of recession,” said BBC chief economics correspondent Hugh Pym.

“It [the growth figure] was below analysts’ expectations. The figure could be moved down, or indeed upwards.”

 How the ONS announced the UK had emerged from recession

Our correspondent said the move out of recession had been greatly boosted by the government car scrappage scheme.

Joe Grice, from the Office for National Statistics (ONS), said the UK’s production and service sectors each grew by 0.1% during the quarter.

The ONS figures also showed that GDP fell by a record 4.8% in 2009.

“The Q4 GDP figures are a major blow to hopes that the UK economy had emerged decisively from recession in Q4,” said analyst Jonathan Loynes at Capital Economics.

“No doubt some commentators will claim that the figures are under-estimating the true strength of the recovery and will be revised up in time.

“That is certainly possible. But it won’t change the big picture of an economy still operating way below both its pre-recession and trend levels of output.”

‘Frail’ recovery

The UK recession began in the April-to-June quarter of 2008, and was the longest UK recession on record.

During 18 months of recession, public borrowing increased to an estimated £178bn, while output slumped by 6%.

After the GDP figures were published, John Wright, chairman of the Federation of Small Businesses, said that the recovery remained “frail”.

In order to strengthen the recovery it is important that we boost consumer confidence and demand and that interest rates are held steady as continued investment in the economy will be the key to ensuring a sustainable recovery,” he said.

Meanwhile, Lee Hopley, chief economist at manufacturers organisation EEF, said: “Whilst today’s data confirm that manufacturing is now out of recession, they also continue to raise questions over the health of the wider economy.

“The trajectory for the recovery, particularly in the next six months, is an uncertain one and the best prospects remain an export-driven turnaround.”

First estimates of how the economy has performed are made with about 40% of the data available, and Investec economist David Page has warned there is “plenty of room for surprises” in the figures.

But the BBC’s Economics Editor Stephanie Flanders said: “Even with some revision – in fact, even if it turns out that the economy actually started top grow in the third quarter, given that the first estimate of a decline 0.4% has already been revised up to -0.2% – we are still talking about an extremely lacklustre recovery.”

‘Staggering’

Chancellor of the Exchequer Alistair Darling said he was now sure that “we are on a path to recovery.

“I’m confident but I’ll always remain cautious”.

But Shadow Chancellor George Osborne told the BBC that the UK needed a “new model of economic growth” under a Conservative Government.

He added: “Let’s be clear – this is about as weak growth as you can get.”

Liberal Democrat Shadow Chancellor, Vince Cable said the markets would be surprised that growth had been markedly slower than expected.

“Far from the quick recovery the chancellor has been praying for, the economy is only just staggering back into growth,” he said